Keeping the music alive

June 08, 2007

Every time a song is played on the radio -- whether it's Internet, satellite or old-fashioned terrestrial (AM/FM) radio -- the broadcaster is required to pay a royalty fee for use of that music. Fair so far. How the fees are assessed, however, is not so fair.

Terrestrial radio only pays royalties to composers. Performers are not compensated, because radio stations argue that drawing listeners to their music is essentially free advertising.

But Internet and satellite radio broadcasters have to pay both the composers and the performers. Satellite radio does this by paying a flat fee of 7.5 percent of revenue. Until now, small Internet radio broadcasters, too, have been able to pay royalties as a percentage of revenue.

In March, however, the Copyright Royalty Board scrapped that model, instituting a per-song, per-listener basis for royalties, set to take effect July 15. It would be retroactive to January 2006. The net effect? Royalty rates will rise between 300 and 1,200 percent for Internet broadcasters, which will most likely drive many of them immediately out of business.

A bipartisan effort to keep that from happening is being led by Rep. Donald Manzullo (R-Ill.) and Rep. Jay Inslee (D-Wash.) and Sen. Ron Wyden (D-Ore.) and Sen. Sam Brownback (R-Kan.). Their legislation would set Internet radio royalty rates at 7.5 percent of revenue, the same as those of satellite radio.

John Simson, executive director of SoundExchange, the royalty-collecting arm of the Recording Industry Association of America, argues against that legislation, saying that the CRB's rules protect artists. Not all artists, though, want to be protected that way. According to a letter that 18 jazz luminaries sent to Congress, 37 percent of the music played on Internet radio comes from independent artists and labels. On traditional broadcast radio, that falls to 5 percent. So fledgling musicians, who often find it nearly impossible to gain airtime on commercial radio without the backing of a major record company, increasingly rely on Internet radio to help cultivate a wider audience.

Streaming audio of religious services, which intersperse sermons with gospel music, could also be silenced. National Public Radio might do away with Webcasting its jazz programming. Soldiers, many of whom use Web simulcasts of hometown radio stations to keep up with the goings-on while they're posted abroad, would lose out as well if the number of Internet radio outlets shrinks.

The jazz musicians, in their letter to Congress, said: "Please think how our uniquely American music would be different today if those rural and poor radio stations that lost money playing [Louis] Armstrong and Leadbelly were taxed so exorbitantly that they were forced NOT to play their music. That is exactly what we are facing today."

In a letter to Simson, Rep. Howard Berman (D-Calif.) and Rep. Howard Coble (R-N.C.), the chair and the ranking minority member of the Judiciary Committee's subcommittee dealing with this issue, mince few words in urging SoundExchange "to immediately initiate good-faith private negotiations with small commercial and noncommercial Webcasters with the shared goal of ensuring their continued operations and viability."

They add that Congress will exercise its authority and ability "to impose a resolution if the parties prove unable or unwilling to voluntarily address our concerns."

If SoundExchange doesn't move expeditiously, Congress will need to act -- and fast. Otherwise, July 15, in the words of Don McLean, will indeed be the day the music died.